Job growth in the food service industry

What does America make? Increasingly, at least in terms of the number of workers, the answer is food:

In 1990, manufacturing was almost three times larger than the food service industry. But restaurants have gradually closed the gap. At current rates of growth, more people will work at restaurants than in manufacturing in 2020. This mirrors the shift in consumer spending. Restaurants’ share of America’s food budget has doubled from 25 percent in the 1950s to 50 percent today.


Yet, as Derek Thompson notes, our national rhetoric is still stuck in the era of factories and manufacturing:

But the most important feature of the restaurant jobs boom is not what it may say about the future, but rather the fact that it is happening in the first place. Trump and other politicians often say they want to help the common worker. But then they talk about the economy as if it were cryogenically frozen sometime around 1957. The U.S. still makes stuff, but mostly it serves stuff. To help American workers, it helps to begin with an honest accounting of what Americans actually do.

The jobs landscape has experienced much change in the last half century. Certain sectors – such as the tech industry or manufacturing – consistently receive a lot of attention. But, could someone unite the interests as well as depict a group to the public at large that would include restaurant workers, service workers, and nurses (among other fields that have grown tremendously)?

Suburbs to respond to companies returning to cities

Another new issue facing suburbs – in addition to homelessness – is how to respond when companies move their headquarters back to cities:

In Chicago, McDonald’s will join a slew of other companies — among them food giant Kraft Heinz, farming supplier ADM and telecommunications firm Motorola Solutions — all looking to appeal to and be near young professionals versed in the world of e-commerce, software analytics, digital engineering, marketing and finance…

Aetna recently announced that it will relocate from Hartford, Conn., to Manhattan; General Electric is leaving Connecticut to build a global headquarters in Boston; and Marriott International is moving from an emptying Maryland office park into the center of Bethesda, Md…

The migration to urban centers threatens the prosperity outlying suburbs have long enjoyed, bringing a dose of pain felt by rural communities and exacerbating stark gaps in earnings and wealth that Donald Trump capitalized on in winning the presidency…

Long term, the corporate moves threaten an orbit of smaller enterprises that fed on their proximity to the big companies, from restaurants and janitorial operations to subcontractors who located nearby.

It is difficult for any community – whether big city or suburb – to adjust to the move of a large firm out of the community. A number of things are lost: prestige, jobs, philanthropic contributions, and tax revenue. Arguably, suburbs lose more compared to big cities that have broader and more diverse economies: the headquarters in the suburb might be a sizable community anchor.

This may be similar to when suburbs with once-thriving shopping malls try to figure out what to do with that space. It can be difficult to fill the property all at once so suburbs might have to take their time and move one small step at a time.

I’ve argued before that this whole city-suburb competition for headquarters could harm both in the long run as it takes the focus away from a metropolitan effort to encourage business growth. On the whole, it matters less if a company moves from the Chicago suburbs to downtown than if the company decides to leave the entire region for another location. If more businesses move back to major cities, could suburbs find some way to work together to prevent moves? Or, or is the sometimes cutthroat competition between suburbs impossible to stop?

Naperville has 11 Starbucks locations

The recent move of the downtown Naperville Starbucks to a larger location led to a quick mention of the numbers of Starbucks’ location in the suburb:

A favorite place to stop for coffee is on the go in Naperville as two of the 11 Starbucks stores in the city are preparing to move.

Naperville has collected many accolades over the last two decades (see earlier posts here, here, and here) and this may be another one: having this many Starbucks suggests the community has a certain level of wealth and quality of life. Certain businesses can set a community apart and many suburbs would love to have multiple Starbucks not just for the money they generate (think of the drip, drip, drip of sales tax revenues) but for the prestige they confer.

Here are the locations according to Google Maps:

StarbucksNaperville

Not surprisingly, the majority are located along major transportation corridors: Route 59, Ogden Avenue, and 75th Street.

The price to get your business on those blue highway amenities signs

It is a surprisingly complicated – and possibly costly – process to promote your business on a blue sign along the highway:

Roadside advertising programs are administered by individual states, though specific service signs like the one in the picture above tend to be farmed out to contractors. One of the biggest of these contractors is a company called Interstate Logos, which works with transportation agencies in 23 states to not only install the huge blue panels, but also to work with businesses to run the programs…

But even if your business meets all the requirements, and you’ve submitted your online application, there may be competition from other nearby businesses. As for which of those businesses get to be on the signs, that depends on the state’s policy. Colorado rotates the businesses at the end of each contract year, but other states like Michigan give preference to businesses nearer the highway, while still others like Washington use a first come-first serve (with waiting list) approach…

Typical mainline logo signs are about 48 inches by 36 inches, so based on WSDOT’s ballpark figures, it’s probably safe to figure about $300 to $500 per sign (this agrees with the Lexington Herald Leader’s claim of $1,253 for four logos)…

The sites says that in 2010, Kentucky Logos—contracted by the Kentucky DOT—paid the state $618,904.91. That’s great for the state, but according to the report, of the businesses on the 1,568 signs in the state, only 1 to 2 percent leave annually. So it seems the businesses are happy, too.

America: combining public services (highways) with business opportunities (advertising a select number of places for travelers to spend their money).

More thoughts on these signs:

  1. Why not include signs for big box stores? Places like Walmart or Target or Costco could provide most or all of these amenities in one stop.
  2. I don’t think the signs are as effective in denser areas where there a lot more options as you approach the exit. They can highlight a few options but you can already see a lot more signs in the distance.
  3. The lodging and camping signs seem outdated. How many people now drive down the highway and pick out a hotel at the side of the road? That sign space could be better used for other amenities.
  4. How effective are these advertisements compared to other forms? Does McDonald’s get a bigger return on the blue sign or a forty foot tall arch or a combination of both?

Losing sales and property tax revenue as stores close

The difficulties facing retail stores also have an effect on local governments who rely on sales tax and property tax revenue:

Nationwide, sales taxes comprise nearly one-third of the taxes that state governments collect and about 12 percent of what local governments collect, according to Lucy Dadayan, a senior researcher at the Nelson A. Rockefeller Institute of Government, a New York-based research group. “The epic closures of the brick-and-mortar stores is troubling news for state and local government sales-tax collections,” she said. They’re already feeling the hit: States’ tax revenues grew just 1.9 percent between 2014 and 2015, after growing 5.8 percent in the previous four quarters, according to the Rockefeller Institute. Local-government sales-tax collections grew just 1.7 percent, after growing 7.5 percent in the previous four quarters. In Ohio, state tax revenues grew just 0.1 percent, when adjusted for inflation, between 2015 and 2016, according to Dadayan. When revenues don’t continue to grow, governments have to slow down spending and can’t readily invest in long-term projects…

Clark County is not alone. In the southeastern part of Ohio, near the border with West Virginia, Belmont County gets $17 million of its $22 million budget from sales-tax revenues, Mark Thomas, a county supervisor, told me. The county has lost a bevy of retailers of late, including Elder-Beerman, Hhgregg, MC Sports, and Radio Shack. A Kmart in St. Clairsville is expected to close soon, according to the company. The decline in sales tax isn’t the only thing that hurts revenues—abandoned malls mean less revenue from commercial property taxes too. Local governments also see lower income taxes and, when retail workers are unemployed, they spend less, creating a vicious cycle of less and less revenue. “That trickle-down effect is huge,” Thomas said…

States that have seen manufacturing companies depart are bearing much of the brunt of the retail closures, according to Dadayan’s research. She tabulated where Macys, Kmart, and Sears have announced in the past year that they are planning to close stores, and found that Pennsylvania will have the most of those total store closings, at 16. Ohio and Michigan have the second-highest number, at 15 each, alongside Florida. Other states that have bigger populations have much lower combined closings. California, for example, only has eight.

The closures raise the question of what state and local governments will do if retail continues to evaporate. Already, many local governments are attempting to raise taxes to make up for budget shortfalls. Springfield asked voters to approve an income tax in November; the measure failed. The sales-tax rate at both the local and state levels has been creeping up in Ohio as governments try to raise taxes to make up for declines, according to Jon Honeck, the acting director of the Greater Ohio Policy Center, a local think tank. Ohio has also cut back on revenue-sharing between states and local governments since the election of Governor John Kasich in 2010, making it more difficult for local governments to make ends meet. “Some have just cut services, since the state is not going to help them out,” Honeck said.

Two quick thoughts:

  1. Communities have competed for decades over shopping malls and retail establishments. This competition could only increase though it may be less about the opening of new stories (everyone wants replacements for old establishments – for example, see the fate of Dominick’s grocery stores in the Chicago region) and more about retaining existing stores and asking companies to close stores elsewhere.
  2. It is interesting to see which areas are experiencing closures. Not all malls or stores are doing poorly but the successful ones are likely in wealthier areas that will do even better comparatively with the ongoing tax revenues. It is very difficult to convince businesses to locate in communities with less income.

NAR economist: “major housing shortage” in the US

The chief economist for the National Association of Realtors suggests there is a major housing shortage:

“A major housing shortage exists in this country,” Yun said in a statement. “It is therefore disappointing to witness in March the continued lackluster performance in new-home building, which was the second lowest activity over the past six months. Home prices have risen by 41 percent and rents have climbed 17 percent over the past five years at a time when the typical worker wage has grown by only 11 percent. To relieve housing costs, there simply needs to be more homes built.”

My first thought on this reading this: builders and developers are still skittish from the 2000s housing bubble. Instead of risking overextending themselves, compared to the past they are now focusing on more expensive homes or rental properties. Oddly though, I have seen little media coverage regarding builders and developers. They may be a secretive bunch generally but why isn’t there more scrutiny of their actions and motivations?

My second thought: if there is indeed a housing shortage, what does this say about the state of the economy? A booming construction sector is often related to a good economy. It doesn’t necessarily have to be this way in the future, particularly if there is a shift away from sprawl and homeownership of detached single-family homes, even if it was true in the post-World War II era.

Finally, who might be held responsible if there is indeed a housing shortage? It is hard to rally potential homebuyers into a cohesive group. Is there a way to prod politicians and business leaders to act and if so, could their actions even effect much change?

More on the reduced geographic mobility of Americans

A new book from economist Tyler Cowen discusses how the geographic mobility of Americans has declined:

Nowadays, moving from one state to another has dropped 51 percent from its average in the postwar years, and that number has been decreasing for more than 30 years. Black Americans, once especially adventurous, are now especially immobile. A survey of blacks born between 1952 and 1982 found that 69 percent had remained in the same county and 82 percent stayed in the same state where they were born…

One reason people don’t move where the jobs are is because of real-estate prices — which in turn are kept at high levels by regulatory restrictions and NIMBY-ism. In New York City in the 1950s a typical apartment rented for $60 a month, or $530 today if you adjust for inflation. Two researchers found that if you reduced regulations for building new homes in places like New York and San Francisco to the median level, the resulting expanded workforce would increase US GDP by $1.7 trillion. That won’t happen, though: More homes would diminish the property values of existing homeowners.

That locked-in syndrome is a factor in economic stagnation, too: A recent Wells Fargo survey found that white-collar office productivity growth was zero. As the economy was supposedly recovering from the financial crisis, from 2009 to 2014, American median wages fell 4 percent. Men’s median incomes today are actually below 1969 levels. Had we retained our pre-1973 rates of productivity growth, the typical household would earn about $30,000 a year more than it does.

Despite all the hype attached to a few tech companies, far fewer companies are being formed than in the 1980s, and fewer Americans are working for startups. Such new companies are linked with rapid job creation. We’re coming close, Cowen says, to realizing the 1950s cliche (not really true then) of everyone clinging to a job at a handful of huge, soul-crushing companies.

As I’ve seen a number of stories about declining mobility (see earlier posts here, here, and here), I wonder if the period between the early 1900s and 1960s was simply unusual. The American economy was doing well (except for the Great Depression and the World Wars) and other factors including legal segregation in the South drove mobility. What if more limited mobility is “normal” outside of unusual time periods? Should we expect that Americans should be willing to pick up and move just because there may be a job or an opportunity elsewhere? I would guess humans default toward less geographic mobility because moves limit the ability to develop communities. In fact, it has only been in recent centuries that more of the population has even had the opportunity to travel or move large distances from where they were born. Perhaps the real question here is to find out more of what would lead people (whether in the United States or elsewhere) to move significant distances.